Innovate Corp (VATE) 2018 Q1 法說會逐字稿

Good afternoon, and welcome to the HC2 Holdings First Quarter 2018 Earnings Call. (Operator Instructions)

Please note that this call is being recorded.

I would now like to turn the conference over to Mr. Andrew Backman, HC2's Managing Director of investor Relations and Public Relations. Please go ahead.

Great. Thank you, Andrew, and good afternoon, everyone. I'd like to thank you for joining us to review HC2's first quarter 2018 earnings. With me today are Philip Falcone, Chairman, President and CEO of HC2; and Mike Sena, Chief Financial Officer.

This afternoon's call is being webcast on our website, at hc2.com, in the Investor Relations section. We also invite you to follow along with our webcast presentation, which can also be accessed at the HC2 website, in the IR section.

A replay of this call will be available approximately 1 hour after the call. The dial-in for the replay is 1-855-859-2056, with the confirmation code of 4989606.

Before I turn the call over to Phil, I would like to remind everybody that certain statements and assumptions in this earnings conference call which are not historical facts will be forward-looking and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain assumptions and risk factors that could cause HC2's actual results to differ materially from these forward-looking statements. The risk factors that could cause these differences are more fully disclosed in our filings with the SEC.

In addition, the forward-looking statements included in this conference call are only made as of the date of this call and as stated in our SEC reports. HC2 disclaims any intent or obligation to update or revise these forward-looking statements except as expressly required by law.

During the call, management will provide certain information that will constitute non-GAAP financial measures under the SEC rules, such as pro forma net revenue, adjusted EBITDA and adjusted operating income, or AOI. Certain information required to be disclosed about these non-GAAP measures, including reconciliations with the most comparable GAAP measures, is available in the most recent earnings press release, which is available on our website.

And finally, as a reminder, this call cannot be taped or otherwise duplicated without the company's prior consent.

Now let me turn the call over to HC2's Chairman and CEO and President, Phil Falcone. Phil?

Thank you, Andy, and good afternoon, everyone. Thanks for joining us today.

Once again we're going to try to keep the prepared remarks as brief as we can so we have a little bit more time for Q&A. Clearly, I'll focus my comments on some of the more meaningful accomplishments from the first quarter, including the recently announced monetization of one of our Life Sciences investments, before opening it up for Q&A.

Turning to Slide 5, you'll see that we've again broken out a summary of our adjusted EBITDA by segment along with our adjusted operating income for our Insurance segment. You'll also notice the addition of our new Broadcasting segment, which I'll talk a little bit about, which we've broken out for the first time. I'm extremely excited about what's going on in that business and our entry point there, and I'll have more to say about that in a few minutes.

I'm going to speak, obviously, about each of our key subs but, over all, this was generally a pretty decent quarter. Clearly, the Marine Services segment was somewhat of an exception, with Global Marine reporting negative adjusted EBITDA for the quarter. But again as I'll explain in more detail, this quarter's Global results were primarily impacted from some short-term timing issues, mainly from some projects at HMN.

As we've said before, given the nature of the large-scale project work at Global NBN, it means from time to time we can experience this sort of quarterly variability. That's why we think it makes more sense to evaluate those businesses on an annual or LTM basis. These are not businesses that can be judged or should be judged quarter-to-quarter, and we've stated that numerous times.

I would suspect that people are expecting me to say it was a disappointing quarter, but again not at all. What I'm a little bit more disappointed about is our stock price is not taking into consideration the value of our assets and, especially, this recent transaction. Obviously, people, or some people, can't do the math. But we're doing it here, and we'll continue to do what we think needs to be done to make sure that the appropriate value is extrapolated into the overall marketplace.

Just ongoing with some of the different things that are happening at Global Marine, and I think it's important that we've been asked a number of times about the guidance for the year. And we have reaffirmed the full year guidance that we provided in our last earnings announcement for both Global and for DBM, our 2 largest subsidiaries.

I think that's indicative of the, I don't want to say volatility, but the variability that we expect and will continue to expect to see from time to time. It's not unique for these types of businesses that are -- that have these big type of major type of projects. So I think that's very important to understand. And clearly from reaffirming our announcement is not -- our earnings for the year is not taken lightly. So we have crossed the t's and dotted the i's on this and feel very comfortable about where we are and what we mentioned in the previous call.

We have a lot of exciting things going on in the portfolio. So let me quickly walk you through it all.

First quarter highlights. First, as I mentioned, DBM had another decent quarter, with near-record backlog again, of $718 million, and adjusted backlog of $759 million. During the first quarter, Russ and his team continued to ramp up the L.A. Rams/Chargers stadium and Loma Linda Hospital and generated almost $160 million in revenue and $10 million in adjusted EBITDA, all while maintaining that near-record backlog. So that's the kind of business that's out there right now.

I know some people have talked about visibility, et cetera, are things slowing down? Not at all. These are not projects that are decided in one moment and the next. And clearly, there is enough business out there to be had and to continue with what we're doing and what Russ and the team are doing. And it's clear from a backlog perspective that there is business to be had out there for DBM.

Adjusted EBITDA was down from the fourth quarter of 2017 but up over last year's first quarter, again reflecting the same timing-related variability that I mentioned with respect to Global. During the first quarter, DBM distributed $4 million of tax share to HC2, underscoring that this segment remains a good source of cash for us.

And I just want to emphasize again that we are reaffirming our guidance for this business and continue to expect full year adjusted EBITDA between $60 million and $65 million.

Moving on, quickly. Global Marine also reported near-record backlog, of $430 million, and $415 million of backlog for the HMN JV, which is continuing to be very, very good. Adjusted EBITDA for the quarter is, I stated earlier, was down $2.4 million.

A few factors contributed to the first quarter results, including the timing of large projects associated with the HMN JV. More specifically, 2 major turnkey projects in the JV that commenced in prior periods booked negligible revenue during the quarter as a result of normal project cycle. Fixed costs of the operations, manufacturing, distribution, SG&A, et cetera, were still incurred, of course. Volume and profitability of these 2 projects are expected to ramp up across the remainder of 2018, primarily in the second half of the year.

Quarterly variability is nothing new in Global. We've talked about it before. And as a point of reference, if you think back to the first quarter of 2016, Global reported adjusted EBITDA of only $500,000, but for full year was again over $40 million. Last year in the second quarter, Global reported $3.6 million of adjusted EBITDA after coming off a strong first quarter, and for the year again we came in at $44 million.

So this sort of variability is not indicative of future performance, which based on current visibility we believe remains very strong.

All in all, based on our current view of the business we continue to believe that Global will come in within the full year guidance range of between $45 million and $50 million of adjusted EBITDA.

Moving on to energy, as you remember last year you heard us talk about the integration of fueling stations associated with the 2 acquisitions made by ANG, notably Constellation and Questar. ANG was focused last year on completing those deals and integrating and upgrading the associated fuel stations. This year, the main focus has been on ramping up gallon of gas equivalent volumes by ratcheting up business development and marketing efforts to drive organic sales. In addition, they continue to look to develop preferred fueling agreements with new and existing customers, which will drive volume across the network, and continued focus on monetization of renewable gas tax credits across the network.

In the first quarter, ANG saw increased flow of RNG gas through their stations and expect, going forward, that RNG will have a significant positive impact on the business financially. And as a reminder, we told you that alternative fuel energy tax credit was renewed in the fourth quarter for the full year 2017, and that will result in ANG receiving $2.6 million net cash credit after paying out some of the credits to customers as an incentive. You'll see this $3 million credit reflected in the Q2 2018 results for ANG.

Continued positive trend in that marketplace, especially with oil where it is and diesel pricing where it is. And I don't know if many people saw today the acquisition by a major oil company. I believe it was Total that acquired 25% of Clean Energy, which is I think a very positive for the marketplace, and I think it's indicative of how people should be thinking about this because it's here to stay, a lot of upside. And as you get critical mass, you're going to see some of the bigger players get involved in this thing.

And despite what some people report from a station size, we are in the top 3 or 4 CNG entities out there. So even though we have the 40 stations, we're not that far behind from #1 and #2 and, quite frankly, we have a pure-play CNG, where some of the other entities have more convoluted type structures.

So there's a lot of opportunity here. We continue to believe in this business. It wouldn't be surprising to see additional M&A activity, going forward. We've built tremendous value in this entity alone that's I don't think is really understood. But be that as it may, we're continuing to do what we do, and Drew and team are doing a fantastic job here with this business.

Just to touch briefly on PTGi, the focus there continues to be on building relationships. Again the business distributed almost $2 million of dividends to HC2 in the first quarter. So it continues to be a steady payer for us. So the guys, Craig and team, are continuing to bang away and do what they are supposed to do.

Turning to Slide 7, you'll see there are no new significant variations in the Insurance segment from an adjusted operating income perspective. We continue to work through the regulatory approvals relative to the acquisition of Humana's long-term care business and currently expect that the transaction will close in the third quarter. There's always typically regulatory nuances that you have to deal with here and no reason to believe that we think it's not going to close. We're very excited about it. I think, again, it will be transformational for us and will take the portfolio size up from about $1.4 billion to $3.6 billion, $3.7 billion.

There is definitely business to be had out there over and above what we're seeing with Humana. We want to do it blocking and tackling. And again I don't think people recognize what we're doing here, and I fully expect that we will ultimately see the value in Insurance alone being realized.

Moving on to Pansend. As we hope you saw, we announced a major milestone and really transformative event for both Pansend and HC2, where Janssen Biotech, one of the Janssen Pharmaceutical companies of Johnson & Johnson, will acquire BeneVir, a Pansend portfolio company focused on developing oncolytic immunotherapies for treatment of cancer, in a transaction valued at up to $1.04 billion. The consideration includes a $140 million upfront payment to BeneVir shareholders and up to $900 million in contingent payments for achieving certain predetermined milestones.

When I think of our stock price and I look at this, if people think that we did this just for the $140 million up front they must be reading the wrong paper. There were clearly a lot of people looking at this thing. Johnson & Johnson has done a tremendous amount of diligence on this. And one of the key reasons why we went with them is their commitment to it from an investment perspective, from a firm perspective and how important it was for them. Obviously, I can't speak for them and they will tell you obviously more on their call, I believe; if not, in whatever they announce.

But this was not -- this was a long time in the making. There was -- not taken lightly by anyone, and we had to pick I believe a suitor that we believed would be able to deliver and deliver on the back end. And the more work that they had done on this, I believe the more commitment that we saw out of them. And in essence, it turned from an option to buy to this buyout. So I think that's indicative of the belief in the product.

And as we've talked about time and time again, the credibility underlying BeneVir and the founding partners of BeneVir and why the deal was structured like this, this is the real thing, and it's I think something that people are going to be very surprised. And I've said this before that I believe Johnson & Johnson will someday look back at this and say they got a great deal, a fantastic deal on this.

So we have no reason to believe that this balance is not going to come to us, and it's one of the key reasons why we went with them; again, their commitment and so on and so forth.

So we're very, very thrilled about that transaction, and it took a little bit longer than we expected but turned out how we expected it, and some.

Based on our current view, we believe our existing NOL should offset most, if not all, of the tax liability of the initial $75 million upfront cash payment. Obviously, we have to think about where we are on the back end for remaining payments as it relates to tax dynamics, but we're already all over that.

Since our original investment in November 2014, we invested approximately $8 million in BeneVir, $60 million in the entire Pansend platform. So a pretty decent rate of return on BeneVir for the most part. And again, this is why we've been excited about the Pansend platform and what the team has done there. And again, it is not the only thing in that portfolio. So we're very excited about some of the other things that they're doing and we're doing, of course, and thrilled about where we are right now.

We need regulatory approval, which could take up to 45 days, but expect to close it in the second quarter. So I don't think it's going to take the full 45 days, but it could.

And as you guys know, we've been talking about the deal for several quarters and hope you can understand why it took a while to finalize. It was incredibly complex, addressing both technical and scientific issues. David Present and Cherine Plumaker did an amazing job here, and hats off to them guiding BeneVir to this point. And clearly, hats off to BeneVir management who, again, we believed was the real deal from day one. It's not the first type of transaction that these guys have been involved with as it relates to this type of asset.

It's something that we've said we'd do. We've done it. And I know it was important for people to see that and investors to see that. I hope people will see that the capital we've invested in these assets has the potential to generate tremendously attractive returns and shows how we can use them to generate value up to the holding company. And we were somewhat criticized for it but kind of stuck to our guns because we knew the underlying value here. And don't be surprised with some of the other things, again, that we're doing in that portfolio.

Beyond the excellent financial returns, obviously the intangible dynamic of the potential contribution of this science in the fight against cancer is pretty exciting. When I kind of looked at it -- when I always talked to people in the past about solving problems and financial analysis, et cetera, I always say, hey, come on guys, we're not trying to find a cure for cancer. Well, it turns out that this was a step in that direction. So it's pretty exciting just from an intangible part of it.

The technology is clearly a game changer and a potential lifesaver for patients living with difficult-to-treat cancers, and we look forward to seeing its benefits for years to come and clearly believe Johnson & Johnson will look at it down the road and say, wow, what a fantastic transaction that was. And quite frankly, for both of us. These types of situations, they take a good deal of capital to take from Point A to Point B. And as we talked about, we're not in that business. We want to be good sponsors, and we want to do what's necessary. And I think this worked out just like we said it would and just like we expected.

Moving on to Broadcasting, where we've continued to strategically acquire assets through carefully targeted transactions. The goal of our over-the-air strategy is to build the largest state-of-the-art broadcast OTA distribution platform in the U.S. Including closed and pending transactions, we have 150 operational stations, including 10 full-power stations, 42 Class A stations and 98 LPTV stations, with an additional 500 licenses and construction permits.

I think again from a value proposition perspective people want to see what's happening and the value that we're creating in this marketplace. They can look at some transactions that are out there from a stick value perspective. Granted, they may be ABC, NBC, CBS, et cetera, affiliates, but that doesn't mean that we won't be able to find content to not necessarily replicate what they're doing but to prove that we're buying these stations at a super attractive valuation.

The objectives here was to get the footprint across the U.S. and move quickly before these stations are gobbled up. At the end of the day, we do have -- obviously, we're focused on the broadcast market, but keep in mind this is spectrum. They're not making any more of it. It's the pipeline into the house.

Our aim here is to get to 75%, 80%, 85% coverage of the U.S. through the OTA market, which we think will be of value, a phenomenally value-added proposition and a distribution platform, alternative distribution platform, that I think people will see and use pretty effectively as a complementary to the other video medium and technologies in the marketplace today.

So currently we are covering or we're in about 130 markets and include 9 of the top 10 markets and currently carrying programming for 40 networks. I don't think people understand and appreciate the breadth and the depth of this platform and the value here. Clearly, we've been focused on it for a reason.

We believe that this platform will create an avenue for high-end content providers to deliver their product to more viewers over the air while positioning us on the cutting edge of a rapidly evolving media and technology distribution landscape. We are uniquely situated to benefit through past cost-effective adaptation to new broadcast industry standards; specifically, ATSC 3.0, which is a very disruptive technology.

But essentially, we don't need that to succeed. We have tremendous real estate, and there's strength in numbers. I don't believe this strategy would work with 1 or 2 stations, which is, hence, why we stepped out and moved very aggressively on it where we could blanket the country. That's exactly what we've done. We were early. We were relatively aggressive not only from a pricing perspective but in our canvassing the landscape and acquiring these stations.

And we are absolutely already seeing price increases for similar assets. And we were -- as they say, our timing was pretty good on this. And fortunately, we moved very quickly, because there is a pretty dynamic change in the marketplace just from when we started buying to the stations that are out there today. And they are getting fewer and fewer and fewer out there and especially as it relates to the auction. Reducing -- the mobile auction, it's the same spectrum in the mobile auctions. Reducing the number of broadcast stations in every DMA from 50 to 35, it makes our real estate that much more valuable.

And clearly, if you look at the trends, it's what the cable companies have been and will continue to be concerned about is the cord cutting and the movement to the over-the-top phenomenon as well as the over-the-air phenomenon. There's nothing like free TV. It's incredibly crisp and digital today, unlike 1970s and '80s where you had a fuzzy experience. And quite frankly, the content's there. There's people chomping at the bit to be able to utilize a distribution network that we're building out.

During the first quarter, we made 2 key hires, bringing in 2 industry veterans to lead and accelerate the growth of this business and 2 phenomenal hires, quite frankly. Kurt Hanson is Chief Technology Officer, and Louis Libin is Managing Director of Strategy. Both come from -- have pretty impressive backgrounds in this industry on the engineering side, and they came on board and I believe are incredible believers in what we've done. And we're doing it all together as a team.

Highest priorities of the Broadcasting management team are to integrate the stations at this point and the station groups that we've acquired over the past 3 quarters, continue to drive the cost efficiencies and increase revenues through advertising and carriage. We're really focused on that integration and getting the engineering done so that we can bring everything under one roof and then can market the entity as a one-stop shop for delivering content nationwide.

It's going to take a few quarters to do this, but we have the right management team and we're well on our way. But the good news is we have all the pieces of the puzzle and we're putting those pieces of the puzzle together pretty effectively. And the phenomenal beauty of it is our entry price, which I don't want to go through in detail, but we are pretty well positioned there.

Just moving on, kind of Slide 8, focuses and priorities, our focus and priorities. As we talked about last call, one of our key priorities remains the optimization of the HC2 capital structure. Early this week we completed the refinancing of our Broadcasting bridge loan that helped support the expansion of our OTA strategy.

We had this kind of hanging out there, and I know some people were kind of scratching their head over it. We just wanted to get it done so we could take a step back and then kind of figure out what we were -- what our next step was to continue moving in the direction that we've been preaching.

We priced these bonds at the [$102] price. It's an important step and provides additional optionality. But very, very, very important for us to

focus on the 11%s, and we know what we're doing. We are crossing the t's and dotting the i's on this and figuring out how, when, where, what, why. But come hell or high water, we are going to reduce our cost of capital.

And in addition, we're continuing to look at the ways to reduce the preferred equity. Looking at financing at the subsidiary levels is part of this, including Broadcasting assets. So I think the good news, we've got alternatives, we've got options. I don't like paying that kind of interest cost. We knew we would have to do it starting out, but I think now we are well positioned to take those appropriate steps.

Beyond the capital structure, we're working on other potential opportunities to monetize other assets across the portfolio. BeneVir was a clear example of how we've created value in Pansend. It's no secret that there are other potential value-creating opportunities. But again, we want to take our time. We don't want to be pressured into doing things as it relates to monetizing, but there are options out there. We'll continue to evaluate those quarter-to-quarter-to-quarter, but they're there, and that's the good news.

We discussed the OTA strategy earlier and think we're extremely well positioned here. You're going to see us talk more and more about this, especially to capitalize on changes in the marketplace and the technology.

Finally, the Core Operating Subs continue to perform well. Don't lose sleep over Global Marine. The company has been around for 100 years. Again, these guys know what they're doing. It's not a slowdown; it's various nuances in the marketplace. We continue to be big believers in these underlying businesses and confident in our full year outlook for DBM and Global, again just to reiterate, as we've reaffirmed our full year adjusted EBITDA guidance for each of them.

So I tried to keep this short and sweet. With that, let's open up the call to your Q&A. Hopefully there's no boring questions. Kidding. Anyhow, thank you for joining and if anybody has any questions, just we're here. So with that, we'll pass it on and open it up.

(Operator Instructions) And our first question comes from the line of Kurt Hoffman, with Imperial Capital.

Congratulations on BeneVir. It seems to put you in a great position to reset the capital structure as you mentioned. The bonds are now trading at something like a 6.5% yield to worst. So what's your thought on timing there and any changes to your expectations around the rate after the BeneVir result?

I continue to think they're very, very cheap and would hope that they would be a little bit more reflective -- the actions that we've taken would be a little bit more reflective. But be that as it may, we're getting close to the right levels.

As I mentioned in the body of the call, top priority for us. We are all over this like a wet paper bag. I'd like to do it sooner rather than later. I'd like to have it done yesterday. We're waiting for these things to get done, and we are crossing the t's and dotting the i's on this. Obviously, I can't tell you the exact date, but I want to get that kind of locked and loaded sooner rather than later. But we're just looking at -- we're trying to be creative from a structural perspective on how best to get it done and do things like that, going forward, to give us the flexibility.

So potentially doing it before the call premium drops, is that on the table?

Anything is a possibility.

Okay. Fine. And then turning to the Broadcast segment, negative $5 million EBITDA in the quarter. Can you talk about how you expect cash flow at Broadcast to look over the near term and medium term?

We're not forecasting that, but this is again not a surprise, but more on the network side. And we're doing things and really realized that it would take a quarter or 2 to get our arms around that and start reducing accordingly. But that's a key focus of ours. And it's primarily on the network side that we're experiencing that. That's the Azteca, not the station side, the Azteca network side. And there's things that we can do to get that done. We had to get it under our umbrella and are doing those things. While we can't project and don't want to start projecting on that, I'm not the type that will sit and watch that number increase, and I don't want it to increase. Again, we have to kind of cross the t's and dot the i's accordingly, make sure that we're doing the right thing. And we feel like we've got our arms around it and know what we need to do.

Well, I don't want to lock you in to a long-term forecast, but is $20 million cash burn for 2018, is that something we should model in?

High, that's high.

That's high. $15 million?

Kurt, we'll give you updates as we go along, clearly.

Our goal is to get that down as close as we possibly can to zero and going the other way. And again, we are not watching that -- watching it without doing anything.

And would you expect corporate costs at Life Sciences to decline any with BeneVir gone?

It's a good question. I think we should, over time. My guess is depending on when it closes in the second quarter. If it closes in the second quarter, there will be certain expenses associated that we would have accrued accordingly and then will disappear.

And our next question comes from the line of Sarkis Sherbetchyan, with B. Riley.

Congrats to the teams at HC2 and BeneVir for a fantastic transaction, Phil, which if I'm not mistaken was about $8 million to HC2 on a cost basis in the past 4 years, if that's right? So a lot of value creation there, right? And I do agree that some can't seem to do the math. Phil, so in that light, can you help us understand what other monetization opportunities you're considering in the portfolio, either in Pansend, with a little bit more flavor there, or across the broader HC2 platform?

Well we don't want to be traders of our assets. We clearly believe in the platform and building out the things that we're doing. We've got to think of taxes associated with it, et cetera. And we clearly zero in on our return on capital and opportunity cost on the different underlying industries. We will be opportunistic. There are things that we could do. Clearly, we've received incoming phone calls on, and we continue and always have on, some of our different assets. And that's why I'm saying there's always options for us. We just have to think about redeploying the capital, what we're going to do with that if we can get -- if we can redeploy that capital. But one of the beauties of this platform and the dynamic around the control is we can move things around, and if we believe that things are not performing or will not perform or kind of hit a peak we will need to act accordingly. And as it relates to Pansend, specifically, as I've mentioned in the past, we don't want that entity as kind of a black hole of funding to commercial. We've done a -- I think the team has done an exceptional job incubating, as we said we were. Without going into too much detail, there's opportunities there that, whether it's JVs or strategics, et cetera, that we are talking to and are probably heating up at the moment. But again, we want to make sure that we're getting appropriate value, because we do think there's phenomenal value with the 2 underlying -- 3 underlying assets, quite frankly, remaining there. So as it relates to other things that we could monetize, I guess you could -- you have to keep a flexible mindset, but we're kind of balancing a number of different things, going forward. But the beauty of it is we still feel very comfortable operationally that there's some pretty solid growth here and pretty solid cash flow, especially from, like, a DBM, where we don't have to do kind of a knee-jerk. We get asked that question all the time. These companies have ups and downs, and as long as they're structured right and as long as we can keep building and getting cash out of them and managing the business, over all, that's how we have to think about it. But we clearly have that mindset of being flexible where necessary, when necessary. And I think you could feel comfortable that, especially with Pansend with some of the things, there are some opportunities there to extract some real value that we fully expect will probably come to the forefront sooner rather than later.

Understood, and that's certainly helpful color there. And I suppose, thinking through what you're to receive, assuming the transaction closes with regards to BeneVir, I think it was about a $70 million net proceed number. A little bit of -- I think there was an NOL associated with that that could shield, right, some of the cash taxes that might be paid. What would you do with that capital? How would you redeploy it?

Well, it's going to be more than that, for one; probably up to $85 million. And listen, we are -- we'd like to -- we don't have plans to go out and buy anything at the moment. Clearly, we want to try to utilize it, especially as it relates to debt reduction or cost of capital. Thinking about cost of capital and allocating accordingly, we think it's going to be obviously a good thing to have on our balance sheet as we look to, again, try to do some creative financing. But there's no rush to do anything with that at the moment. We think we've got the strategy for the Broadcasting business and we're doing some things there. The underlying businesses don't need cash. As you've seen, we've been extracting cash. So it's not like we're going to turn around and start pumping money into DBM and Global, for one. Broadcasting, we have a strategy. ANG, I think we're pretty set. Insurance, we've got that deal kind of locked and loaded. So we'll try to be opportunistic where we can but make sure it fits in with the big picture, with building out platforms or building another platform, but having the appropriate debt cost to start thinking more longer term with that.

Understood. That's helpful. And if I kind of switch gears here, thinking through Insurance, it does seem to be pretty steady, and this is before bringing over the Humana LTC block of business, which I think you said would close in 3Q? Can you maybe remind us what that means as far as transforming the Insurance segment? Obviously, you're adding a big book here to the business. What would it mean from a maybe cash generation perspective? Or kind of how should we think about the changes you can make to that portfolio to be accretive to your existing platform?

Well, I think, for one, one of the beauties of the long-term care space is that it's typically 10-, 15-, 20-year duration capital, depending on the underlying structure of the assets -- not the assets, but the policies. And keep in mind that these portfolios, I don't want to say are orphaned or had been orphaned, but they are managed typically in a comingled manner, where if a large, $40 billion, $50 billion, $60 billion-plus, insurance company has typically 5-year duration capital, they're not setting up a separate team to manage $1.5 billion or $2 billion. It's prorated across the board. So you could see, and we have done that, where you're extracting value just by going out on the curve. Not because of anything that the sellers have done, it's just how they manage their business, where primarily short-term in nature because of it's a P&C business or a fixed annuity business, versus long-term care. And you're not going to buy a 5-year piece of paper or a 30-year piece of paper; you're going to buy typically a 5-year piece of paper because it's asset/liability matching. So you can -- what we've found is that in these typical portfolios there is kind of low-hanging fruit that you can extract value just by virtue of going out on the curve. And then you've got some -- there are certain things that you could do with the portfolio. But we've done I think a pretty solid job with that, and you've seen our RBC, which is kind of the metric that is closely watched by the regulators, has improved and done well. And then you've got the underlying operation that you're managing, as well. So there are things that -- this is not kind of static management. This is active hands-on, where we are really proving that we're building value here, and I think it's noted. And when I talk about the transformational transaction, there's a number of these portfolios out there, and some of them are big. And there are -- the more credible -- if you want to become credible, it takes not just 1, but maybe 2, deals like this to get done. I think this second deal, Humana, will be transformational from that perspective, that people see that we have the capability of closing, that we have the platform, which is a huge value-added proposition in the marketplace.

And when I talk about platform, it's the servicing platform. When we did the first deal, we bought from American Financial the 100 people down in Austin that are servicing the portfolios. There's a tremendous value in that, especially when the sellers understand that we are the insurance company; we're not outsourcing that. So there's no question there's always hurdles in closing these things, as evidenced by the time it's taken. And we still have a couple of hurdles to jump over and some wood to chop, but I'm cautiously optimistic that it will close. And again, I think it's just a credibility factor that we are closing deals and now will be up to almost $4 billion. It just helps in the general insurance marketplace. So I think that's what I mean from a transformational perspective, aside from the fact that, oh, by the way, there's a lot that we can do with the portfolio.

Thanks, Sarkis. I want to thank Phil and Mike, and I want to thank everybody here for joining us today. As always, our team is available to speak should you have any follow-up questions. Please do not hesitate to contact me directly, at 212-339-5836.

Andrew, if you wouldn't mind, could you please go ahead and provide the conference call replay instructions once again?

Have a great evening, everybody.

Thank you, Mr. Backman. As a reminder, this conference call will be available for replay beginning approximately 2 hours after this call. Dial-in for the replay is 1-855-859-2056, with the confirmation code of 4989606. Again, dial-in for the replay is 1-855-859-2056, with the confirmation code of 4989606.

This concludes our call, and you may now disconnect.